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META Adds New Features to Facebook & Messenger: Is the Stock a Buy?
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Meta Platforms (META - Free Report) announced new features for Facebook and Messenger on Friday at its Facebook IRL event in Austin. These features will help Facebook users, particularly young adults (18-29-year-olds), access and discover content beyond their close friends.
META is launching Messenger Communities, which offers a new way for small-to-medium-sized communities to connect over shared interests.
META’s New Local & Video Tab to Boost Facebook’s Users
Meta Platforms is leveraging AI to boost Facebook’s appeal among young adults, a demography that used to prefer Alphabet’s (GOOGL - Free Report) YouTube and Snapchat.
As a part of this initiative, META is launching a single tab Local that brings together content curated from places like Marketplace, Groups and Events.
Weekly and Weekend Digest for Events are a compilation of upcoming event recommendations delivered to users through a notification on Facebook. META is testing an Explore Tab that will offer varied content to Facebook users.
It is also set to launch a full-screen Video tab under which users can find Reels and other videos they love. This is expected to boost Facebook’s popularity among young adults who roughly spend 60% of their time watching videos.
Group AI, Matchmaker - New Features From META
META is testing a customizable Group AI that will help members of a Facebook Group find answers to questions that have been previously asked.
Meta Platforms launched Matchmaker, a new feature on Facebook Dating that allows users to invite up to five friends to swipe for potential matches on their behalf.
META has started rolling out Meta AI and is on track to achieve its goal of becoming the most used AI assistant by the end of the year. Meta AI is currently available in more than 20 countries and eight languages.
In the United States, Meta Platforms is rolling out new features like Imagine edit, which allows people to edit images they generate with Meta AI.
META’s Llama family of foundation models has been a game changer. The latest Llama 3.1 includes the first frontier-level open-source model, as well as new and industry-leading small and medium-sized models. It is already working on Llama 4, which is expected to boost META’s capability in the long run.
META Shares Ride on Expanding User Base
Meta Platforms shares have returned 69.7% year to date, underperforming the Zacks Computer & Technology sector’s return of 23.5% and the Zacks Internet Software industry’s appreciation of 24.1%.
Except for NVIDIA (NVDA - Free Report) , it has outperformed the rest of “Magnificent 7” over the same time frame. The group includes Alphabet, Microsoft (MSFT - Free Report) , NVIDIA, Apple and Tesla, apart from NVIDIA and META.
META Outperforms Sector YTD
Image Source: Zacks Investment Research
META’s Data Trove Makes the Stock an AI Behemoth
AI is heavily dependent on data, of which META has a trove driven by its more than 3.2 billion daily users. Meta Platforms has been leveraging AI to improve the potency of its platform offerings, including WhatsApp, Instagram, Messenger and Facebook.
Its staggering reach and increasing ad impressions (up 10% year over year in second-quarter 2024) make META one of the most important players in the digital ad sales market apart from Alphabet.
META’s advertising revenues (99% of Family of Apps revenues) increased 21.7% year over year to $38.33 billion and accounted for 97.9% of second-quarter revenues. At constant currency, revenues increased 23% year over year.
META’s Estimate Revision Shows Upward Movement
The Zacks Consensus Estimate for 2024 earnings is pegged at $21.36 per share, up 0.4% over the past 60 days, indicating a 43.64% year-over-year increase.
The consensus mark for third-quarter 2024 earnings is pegged at $5.15 per share, up a couple of cents per share over the past 60 days, indicating a 17.31% year-over-year increase.
However, META stock is not so cheap, as the Value Score of C suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, META is trading at 8.43X, higher than its median of 7.27X and the broader sector’s 6.07X.
P/S Ratio (F12M)
Image Source: Zacks Investment Research
Conclusion
META’s growing footprint among young adults, driven by improving recommendations, boosts competitive prowess. AI usage is making it a popular name among advertisers. This is expected to drive top-line growth.
Despite concerns over the monetization of its AI services in the near term and extending regulatory concerns, META’s growth prospects are huge driven by the growing adoption of its services. A Growth Score of B reflects this enormous opportunity for investors.
Image: Bigstock
META Adds New Features to Facebook & Messenger: Is the Stock a Buy?
Meta Platforms (META - Free Report) announced new features for Facebook and Messenger on Friday at its Facebook IRL event in Austin. These features will help Facebook users, particularly young adults (18-29-year-olds), access and discover content beyond their close friends.
META is launching Messenger Communities, which offers a new way for small-to-medium-sized communities to connect over shared interests.
META’s New Local & Video Tab to Boost Facebook’s Users
Meta Platforms is leveraging AI to boost Facebook’s appeal among young adults, a demography that used to prefer Alphabet’s (GOOGL - Free Report) YouTube and Snapchat.
As a part of this initiative, META is launching a single tab Local that brings together content curated from places like Marketplace, Groups and Events.
Weekly and Weekend Digest for Events are a compilation of upcoming event recommendations delivered to users through a notification on Facebook. META is testing an Explore Tab that will offer varied content to Facebook users.
It is also set to launch a full-screen Video tab under which users can find Reels and other videos they love. This is expected to boost Facebook’s popularity among young adults who roughly spend 60% of their time watching videos.
Group AI, Matchmaker - New Features From META
META is testing a customizable Group AI that will help members of a Facebook Group find answers to questions that have been previously asked.
Meta Platforms launched Matchmaker, a new feature on Facebook Dating that allows users to invite up to five friends to swipe for potential matches on their behalf.
META has started rolling out Meta AI and is on track to achieve its goal of becoming the most used AI assistant by the end of the year. Meta AI is currently available in more than 20 countries and eight languages.
In the United States, Meta Platforms is rolling out new features like Imagine edit, which allows people to edit images they generate with Meta AI.
META’s Llama family of foundation models has been a game changer. The latest Llama 3.1 includes the first frontier-level open-source model, as well as new and industry-leading small and medium-sized models. It is already working on Llama 4, which is expected to boost META’s capability in the long run.
META Shares Ride on Expanding User Base
Meta Platforms shares have returned 69.7% year to date, underperforming the Zacks Computer & Technology sector’s return of 23.5% and the Zacks Internet Software industry’s appreciation of 24.1%.
Except for NVIDIA (NVDA - Free Report) , it has outperformed the rest of “Magnificent 7” over the same time frame. The group includes Alphabet, Microsoft (MSFT - Free Report) , NVIDIA, Apple and Tesla, apart from NVIDIA and META.
META Outperforms Sector YTD
Image Source: Zacks Investment Research
META’s Data Trove Makes the Stock an AI Behemoth
AI is heavily dependent on data, of which META has a trove driven by its more than 3.2 billion daily users. Meta Platforms has been leveraging AI to improve the potency of its platform offerings, including WhatsApp, Instagram, Messenger and Facebook.
Its staggering reach and increasing ad impressions (up 10% year over year in second-quarter 2024) make META one of the most important players in the digital ad sales market apart from Alphabet.
META’s advertising revenues (99% of Family of Apps revenues) increased 21.7% year over year to $38.33 billion and accounted for 97.9% of second-quarter revenues. At constant currency, revenues increased 23% year over year.
META’s Estimate Revision Shows Upward Movement
The Zacks Consensus Estimate for 2024 earnings is pegged at $21.36 per share, up 0.4% over the past 60 days, indicating a 43.64% year-over-year increase.
The consensus mark for third-quarter 2024 earnings is pegged at $5.15 per share, up a couple of cents per share over the past 60 days, indicating a 17.31% year-over-year increase.
Meta Platforms, Inc. Price and Consensus
Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote
META Stock Overvalued
However, META stock is not so cheap, as the Value Score of C suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, META is trading at 8.43X, higher than its median of 7.27X and the broader sector’s 6.07X.
P/S Ratio (F12M)
Image Source: Zacks Investment Research
Conclusion
META’s growing footprint among young adults, driven by improving recommendations, boosts competitive prowess. AI usage is making it a popular name among advertisers. This is expected to drive top-line growth.
Despite concerns over the monetization of its AI services in the near term and extending regulatory concerns, META’s growth prospects are huge driven by the growing adoption of its services. A Growth Score of B reflects this enormous opportunity for investors.
META currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.